2004 Budget Speech
Transcript of 2004 Budget Speech
THE 2004 BUDGET SPEECH
BY
YAB DATO SERI DR. MAHATHIR BIN MOHAMAD
PRIME MINISTER AND MINISTER OF FINANCE I MALAYSIA
INTRODUCING THE SUPPLY BILL (2004)
IN THE DEWAN RAKYAT
12 SEPTEMBER 2003
“BUILDING ON SUCCESS, INVESTING FOR THE FUTURE”
Mr. Speaker Sir,
1.
I beg to move the Bill intituled “An Act to apply a sum from the
Consolidated Fund for the service of the year 2004 and to appropriate
that sum for the service of that year’’ be read a second time.
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INTRODUCTION
In the name of Allah, the most gracious and most merciful.
2. Praise be to Allah, for enabling the Government to once
again table the 2004 National Budget in this Honourable House. The
Mid-Term Review of the Eighth Malaysia Plan (8thMP), which is currently
being undertaken will be tabled in this House on 30 October 2003. 3. In formulating the 2004 Budget, we have therefore, taken into
account the performance of the first half of the 8thMP period with the view
to ensuring the full implementation of development policies and
strategies.
HALF A CENTURY OF RAPID PROGRESS
Mr. Speaker Sir,
4. The nation has just celebrated its 46th year of independence.
We are grateful to the Almighty as Malaysians from all walks of life were
able to celebrate the occasion in an environment of peace, prosperity
and jubilance. We value our independence. We are free from
colonisation. We are also free from domination by super powers. We
are also able to regain our honour and dignity. We are able to manage
our country. Our country has achieved significant progress as well as
gained recognition and respect of the world.
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5. When we gained independence, our economy was
completely dependent on rubber and tin. However, our efforts to
transform the economy since the 70s have turned Malaysia into a
modern economy, with the industrial and services sectors contributing
almost 90% to the Gross Domestic Product (GDP). The nation has
embarked on the development of heavy industries and is now producing
our very own national cars, which have penetrated nearly 80% of the
domestic market. Today, we are the 17th largest trading nation in the
world and a major exporter of electronic products. Exports of
manufactured goods exceed 85% of the nation’s exports.
6. To meet our industrialisation needs, we have also put in
place a network of modern and efficient infrastructure. The nation is now
connected by the North-South and East-West Highways. We have also
built modern urban transportation in Kuala Lumpur and its surroundings
with the construction of the Light Rail Transit (LRT), monorail and electric
rail commuter. We have also constructed ports and world-class
international airports. Malaysian ports presently have the capacity to
handle 11 million TEU containers and about 450 million tonnes of cargo.
Port Klang presently ranks 11th while the Port of Tanjung Pelepas 22nd in
the World Container Port League. The Kuala Lumpur International
Airport (KLIA), which has the capacity to handle 25 million passengers
and 5 million tonnes of cargo, is the most modern airport in the region.
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7. We have also made headways in the area of ICT. The
Multimedia Super Corridor (MSC) has been developed with state-of-the-
art multimedia infrastructure. Indeed, MSC marks yet another significant
step towards propelling the nation into an ICT-based economy. To date,
MSC has attracted more than 900 local and international ICT companies,
far exceeding the target of 500 for 2003. Clearly, earlier sceptics have
now been proven wrong.
8. In the past, the construction of such large infrastructure was
carried out by foreigners. Now Malaysians have the expertise and
technological capability to undertake these projects ourselves. The
nation has nearly 44,000 engineers in civil, mechanical and electrical
engineering as well as 3,000 architects and 2,000 quantity surveyors.
With our experience in the construction of the Second Link, the Kuala
Lumpur Telecommunications Tower and Petronas Twin Towers,
Malaysians have successfully built the Putrajaya Administrative Centre, a
well-planned and beautiful city, a model for other countries. 9. We have been successful in the construction of the Sepang
F1 track, which is acclaimed as one of the best in the Grand Prix circuits.
Our young engineers participated in the venture to further enhance high-
performance cars used by Sauber Petronas to compete in the FI race.
Such experience has contributed towards further developing the
engineering capability of Petronas to produce petroleum products for the
automobile industry.
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10. Many Malaysian companies have ventured abroad. The
largest is Petronas, which is now one of the major international
petroleum companies, operating in 34 countries across the world.
Petronas is involved in exploration, production, refinery and marketing of
oil and gas and is listed in the Fortune Global 500.
11. We have also become a centre of excellence in education.
Today, we have 18 public institutions of higher learning, including an
International Islamic University, as well as hundreds of private colleges
to meet the educational needs of Malaysians. A total of 70 colleges has
also been established to produce technical manpower. We have also
been recognised as a centre of excellence in education by foreign
students. Currently, there are more than 36,000 foreign students from
150 countries studying in our local institutions.
Mr. Speaker Sir,
12. These achievements require a shift in the mindset of
Malaysians towards the adoption of positive values and attitudes,
especially perseverance and determination, ability to compete, to be
confident and innovative as well as resilient. We began 21 years ago
with the adoption of the Look East Policy to emulate the work ethics and
culture of the Japanese and Koreans that emphasises dedication,
discipline and loyalty as well as diligence towards attaining national
development. We also instilled the principle of clean, efficient and
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trustworthiness as well as leadership by example. The public service
has been built on the principle of efficiency, discipline and quality.
13. The Government also adopted the Malaysia Incorporated
Policy, recognizing the paramount importance of closer cooperation
between the public and the private sectors as well as the employees to
work together to achieve economic growth. The Privatisation Policy was
implemented to meet the increasing demand for public infrastructure
facilities apart from reducing the financial burden of the Government.
14. We are a country with a vision. We are almost mid-way
towards our Vision 2020 to become a fully developed nation in our own
mould. We have succeeded in diversifying our economy. We have also
achieved a paradigm shift in the mindset of Malaysians so that we can
become a more responsible, modern and progressive society, with
astute thinking skills and proud of our achievements and have
confidence in our abilities, in line with the information age.
Mr. Speaker Sir,
15. In the span of almost half a century, our ability to manage the
economy has often been put to test. Malaysia experienced its first
recession since independence in 1985, following sharp declines in
commodity prices. We experienced deficits in the balance of payments
and the Government financial account. We have not forgotten the Black
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Monday incident on 19 October 1987 when major stock markets in the
world crashed and adversely affected our stock market.
16. These experiences have made us wiser and more confident
in planning and managing our economy. The high level of economic
growth averaging more than 9% achieved during the period 1988-1996
bears testimony to our success.
17. The regional financial crisis was yet another test of our
resilience and capability. We have thwarted the attempts of international
currency speculators to impoverish the nation by devaluing the ringgit.
The Government implemented unorthodox measures and did not yield to
pressures to seek IMF financial assistance and subjecting the nation to
IMF policy prescriptions. Our measures were severely criticised then
and were said to be doomed to failure. The ringgit peg and capital
controls were strongly objected to, whilst the establishment of
Danamodal, Danaharta and CDRC were construed as bailouts of
Government cronies. On the contrary, these agencies have succeeded in
strengthening our banking system. With this success, we have gained
recognition from the world and international agencies. They are now
urging other countries to learn from our experience.
18. Danamodal had injected RM7.6 billion into 10 banking
institutions to enhance their capacity to provide loans, while more than
70% of the loans have been repaid.
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19. Danaharta has to date succeeded in reschedulling NPLs
worth RM50 billion. The NPL is currently at 6.7%. Meanwhile, CDRC
had successfully resolved 48 corporate debt restructuring cases
amounting to RM52.6 billion. Indeed with all these, we have
strengthened the banking institutions as well as restructured and turned
around companies. As such, we have also avoided fire sales of our
national assets to foreigners.
20. Our success in overcoming the financial crisis and in turning
around the economy has disappointed all our critics. Only politicians and
the mass media with vested interests refuse to acknowledge our
success.
21. Our ability to manage the economy has resulted in the nation
achieving a growth rate of 6.7% during the First Outline Perspective
Plan, OPP1 1971-1990 period and 7.1% in the Second Outline
Perspective Plan, OPP2 1991-2000 period. Consequently, Malaysians
from all walks of life have benefitted from the economic growth, with per
capita income increasing from RM1,132 in 1970 to RM13,683 in 2002.
Our purchasing power parity has also improved significantly from
US$1,247 to US$8,862. At the same time, the incidence of poverty has
declined substantially to 5.1% in 2002 from 52.4 % of total households in
1970.
22. However, we sympathise with those in some states, who
remain entrapped in poverty and sufferings in the midst of our prosperity.
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This is because the leaders whom they elected are incompetent and
incapable of bringing development to the states. Even worse, they
claimed poverty and sufferings are fated and should be accepted. They
believe that it is also fated, if Islamic states are poor, backward and
undeveloped.
Mr. Speaker Sir,
23. The success, prosperity and excellence that we have
achieved, is all due to Malaysia.
24. However, let us not be lulled into complacency. We must be
prepared to face challenges and brace ourselves for future tribulations.
25. With our capability to successfully develop and manage our
economy, Malaysia is now regarded as a model for developing countries.
Many officials and leaders from developing countries have come to learn
from our development experience. Malaysian officials have often been
invited by other countries to provide expertise and training in various
aspects of administration and development.
26. Our willingness to express our strong views on international
issues, including against injustices has inspired those who are unable to
do so. As such, Malaysia has become the spokesman for the third world
and given the honour to host and lead the Non-aligned Movement.
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27. Malaysia has also been recognised as an advanced and
progressive Islamic nation and become a model to many Islamic
countries. They are impressed by our success in building a truly
developed and prosperous Islamic nation. We have succeeded in
undertaking the jihad in many aspects of development, particularly
economic, social, religious and political and proven the capability of the
Islamic community in this age. As such, we have been chosen to host
and lead the 10th Conference of the Organisation of Islamic Countries
(OIC) in October this year.
28. To be able to voice our views effectively at international fora,
we must be proficient in the English language. In the past, Malaysian
officials have often been tasked to chair committees and lead in the
drafting of communiques at international meetings, as we were proficient
in English. To enable the nation to become a global player in the
international arena, we must master the English language. In this regard,
we have embarked on the teaching of science and mathematics in
English. These are subjects of importance in this era of information
technology. As our society progresses, our language will also be
enriched. No one will be interested to learn the language of poor and
backward people.
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CONTINUED ECONOMIC RECOVERY
Mr. Speaker Sir,
29. The Government had announced the Package of New
Strategies Towards Stimulating The Nation’s Economic Growth in May
this year. The Package focussed on four main strategies, namely
promoting private investment, strengthening the nation’s
competitiveness, developing new sources of growth and increasing the
effectiveness of the delivery system. Ninety measures were formulated
under this Package. Indeed, the impact of the Package of New
Strategies has indeed been positive.
30. The performance of the Malaysian economy since the
implementation of the Package of New Strategies is very encouraging,
with a growth of 4.6% for the first quarter of 2003. During the second
quarter, GDP growth remained strong at 4.4%, higher than expected,
despite the negative impact of the war in Iraq and Severe Acute
Respiratory Syndrome (SARS). As such, the economic performance for
the first half of 2003 has achieved the growth target of 4.5% for the
whole year. Clearly, the approach taken by the Government and the
support of all Malaysians have contributed to the stronger growth.
31. All sectors of the economy registered strong growth, with the
manufacturing sector recording the highest growth of 6.5%, followed by
mining 4.5% and services 4.2%.
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32. In terms of expenditure, private consumption continued to
increase by 3.9% during the first half of the year, while private sector
investment responded positively to the incentives provided under the
Package of New Strategies. Private sector investment is expected to
record a growth of 2%, after experiencing a sharp deceleration since the
financial crisis.
33. Notwithstanding the weak external demand, the contribution
of exports to GDP growth remained positive, reflecting the
competitiveness of Malaysian products in the international market. This
is also due to our concerted efforts to seek new markets, mainly in
Africa, South America and West Asia, apart from expanding regional
markets, especially among ASEAN countries and East Asia. This has
also reduced our dependence on traditional markets like the United
States and Europe.
34. The feel good factor has clearly returned to the share market.
The Kuala Lumpur Composite Index surged to its highest level of 756.48
points on 5 September 2003 compared with 632.43 points on 2 January
2003. Total daily transactions reached 586 million units or RM1.17
billion compared with 107 million units valued at RM0.5 billion during the
same period. The market capitalisation is now at RM581.98 billion
compared with RM473.16 billion on 2 January 2003. The buoyant stock
market has also attracted active domestic and foreign investor
participation with total transactions increasing more than three-fold.
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Mr. Speaker Sir,
35. The tourism sector in particular has recovered from the
negative impact of SARS. The preventive measures put in place by the
Government have succeeded in containing the spread of the disease. In
addition, the US-led invasion on Iraq has not adversely affected us. The
measures under the Package of New Strategies to mitigate the impact of
SARS have indeed been successful.
36. The better performance of the economy has further
strengthened the nation’s economic fundamentals. International reserves
continue to increase to RM146.9 billion or US$38.7 billion, which is
sufficient to finance 6 months of retained imports and is 4.3 times our
external short-term debts. The banking system remains strong with
several banking institutions recording good profits. The high liquidity in
the system has enabled the Government to continue with its
accommodative monetary policy, particularly with respect to the low
interest rate regime. In addition, the Government continues to mobilise
non-inflationary domestic resources without crowding-out the private
sector. As such, the Government does not have to depend on external
sources of funding to finance its development programmes. Price
increases have also been contained with the increase in the Consumer
Price Index at 1.2 %.
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37. Despite signs of improvements in the global economy, it is
unlikely that the world economy will recover to its level before the
financial crisis in the immediate term. The path to sustained recovery
remains uncertain, given the geo-political risks still prevailing. The super
powers continue to force and exert pressure to effect regime changes in
countries which oppose them. Since the September 11 incident, the
global war against terror has been used as an excuse to threaten nations
accused of sympathising and protecting terrorists.
38. This is how super powers legitimise their aggression and
oppression on countries like Afghanistan and Iraq and justify their pre-
emptive measures on other countries. Clearly, they practise the law of
the jungle. For the super powers, might is right. Their strength
legitimises everything.
39. We have repeatedly stressed that the only solution to the
geo-political conflicts is to identify the root cause of terrorism. Force and
massive retaliation will further aggravate the situation and undermine
efforts to revive the global economy.
40. The development in the global economic environment calls
for greater concerted efforts towards enhancing regional cooperation.
Stronger regional cooperation will enable us to speak with one voice.
During the Asian financial crisis, countries in the region have
demonstrated their willingness to collaborate to provide support to
affected economies. More than half of the funds mobilised to assist the
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affected economies was from this region. In addition, the ASEAN+3
countries have also mobilised billions of dollars under the Chiangmai and
the Miyazawa Initiatives. We have also pointed out the weaknesses and
shortcomings of the international financial system, which had contributed
to the Asian financial crisis.
Mr. Speaker Sir,
41. It has been more than a decade, since we proposed the
establishment of the East Asian Economic Group (EAEG). The proposal
was rejected then and even deemed to be dangerous. However, after 13
years, the proposal is considered viable and has become a reality that
will lay the foundation for greater economic, trade and financial
cooperation. We had remained steadfast in our stand despite the
opposition. If EAEG had been accepted earlier, we could have avoided
the Asian financial crisis or at least minimised its impact. Since many
years have passed since we first mooted this idea, we need to redouble
our efforts towards realising the EAEG.
42. The East Asia region has trillions of dollars in reserves, which
are largely invested in the West. It is now timely that we seek the best
alternative to maximise the use of these resources for the prosperity of
the region. In this regard, we welcome the establishment of the Asian
Bond Market Initiative (ABMI), which was initiated by the Finance
Ministers of East Asia. Under this Initiative, long-term financial
instruments will be made available to finance private sector investments.
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This will help prevent mismatch in financing as experienced during the
financial crisis, where short-term borrowings were used to finance long-
term investments. This will also avoid foreign exchange risks. To ensure
success of this Initiative, Malaysia will provide appropriate tax incentives.
In addition, we will also take the opportunity to widen the use of Islamic
financial instruments in ABMI, based on our experience and expertise in
developing the Islamic financial system.
43. Regional cooperation must be based on mutual benefits and
respect as well as equal rights and democracy. No one should be selfish
and pressure their neighbours. No one should dominate other nations
nor force others into agreements. Agreements must not be biased.
Unilateralism cannot be accepted. Instead, progress must be based on
consensus, consultations and mutual understanding. Shortfalls and
inequities among neighbours must be redressed as best possible. The
prosper-thy-neighbour principle must be the underlying thrust and
practice in relations among nations.
44. However, the action of a neighbouring nation had often
tested our patience with baseless accusations. We will not do the same.
We will continue to adhere to the principle of good neighbourliness and
fair play. When two parties are unable to resolve disputes through
negotiations, then there is a need for a third party to arbitrate. We are
willing to seek arbitration. Confrontation and war are not our way to
resolve disputes. Threatening and demeaning others are also not our
way. We do not give baseless excuses neither do we manipulate facts. It
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is our hope that our proposal for arbitration will be accepted as soon as
possible.
ENHANCING EFFORTS TOWARDS ACHIEVING EXCELLENCE Mr. Speaker Sir,
45. The external environment remains uncertain. Many people
are still living in fear, especially to travel by air, which have restricted
business transactions. Therefore, we cannot depend on the external
sector. Neither can we continuously rely on Government expenditure to
generate economic growth, as its financial resources are not unlimited.
46. As such, the private sector must resume its role as the
engine of economic growth. We must also seek new markets for our
exports. We must become a truly trading nation whereby we produce our
own goods and export directly to foreign importers.
47. When we planned to become an industrialised nation, we
were driven by the need to provide as many employment opportunities
as possible for our people. The agriculture sector was unable to generate
sufficient jobs. Only the manufacturing sector could provide significant
job opportunities.
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48. The Government did not intend to earn tax revenue from
industries. Hence, we were prepared to give tax exemptions for longer
period as long as there are employment opportunities for our people.
49. Our industrialisation strategy has been very successful. Job
opportunities are so abundant that it had led to an influx of foreign
workers into the country. Malaysians who are willing to work will always
find jobs.
50. In line with the growth in the manufacturing sector driven
especially by foreign investment, the nation’s trade has increased
rapidly. Currently, our total trade is RM760 billion equivalent to US$200
billion. We can justly be proud of our success in transforming our nation
from an agricultural to an industrial economy.
51. Malaysians have benefitted immensely from industrialisation. At
the same time, we have also acquired skills that enable us to establish
our own industries. There are many electrical and electronic products as
well as other manufactured goods which are produced by Malaysians.
When we produce our own goods, the contribution to national wealth is
higher.
52. We do not intend to reduce foreign investment but to
maximise national wealth, we must increase investments by Malaysians.
Furthermore, foreign direct investment has been declining and has
largely flowed to low-wage economies.
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53. Japan, South Korea and Taiwan have not depended on foreign
investment for their industrialisation. Their local entrepreneurs with the
support of the Government have developed their industries through
acquisition or development of their own technology. We were unable to
do so initially as we did not have adequate capital, technology,
management skills and global market knowledge. However, after we
have gained knowledge and experience in these areas, we are now able
to venture and develop our own manufacturing industries. This is evident
from the increased number of our own products, including automobiles,
lorries, buses, light trains, electrical and electronics, various types of
cranes, IT, refineries for oleo and petrochemical products as well as
construction materials and many others.
54. Our investors are less confident in venturing abroad and
prefer to focus only on the domestic market. Since our domestic market
is small, our local producers cannot reap economies of scale that will
enable them to reduce costs. We can only compete with the advanced
economies, if we produce high quality products on a large-scale basis.
As such, our producers must be bold in undertaking ventures to produce
high quality products on a large-scale for the world market.
55. Apart from manufacturing, we must also increase our
agricultural production. There are many agricultural products that can be
processed to give higher value. In addition, the tourism and education
sectors can also contribute towards national economic development.
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56. In fact, we must take stock of our existing capacity as well as
potentials in the industrial sector. There are many areas that can be
further developed to contribute to our economic growth as well as to
enable us to become a larger trading nation.
57. We trade with more than 200 countries, big and small.
However, there are many more countries that we have not explored fully
as trading partners. These include the Gulf, North Africa and other
African countries.
58. Malaysia has made a name in infrastructure development. In
the past, foreign contractors were awarded contracts to build roads,
bridges and dams. But now Malaysians are able to compete to secure
such contracts. In oil exploration and production, Petronas has
operations in more than 30 countries. We need another consortium to
undertake oil exploration, production and refining. In Malaysia, the
Government can allow another consortium to undertake the development
of marginal fields so as to gain the confidence of other countries.
59. In promoting Malaysian companies abroad, the quality and
ability of Malaysian companies are of paramount importance. We must
not allow companies which do not have the capability to seek contracts
and business opportunities abroad so as to sell them to other
companies. This will only result in the erosion of confidence in Malaysian
companies as well as our nation.
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Mr. Speaker Sir,
60. We have constructed ports and airports to provide excellent
services to our exporters and importers. In addition, our traders must
fully utilise our expressways and railways.
61. Currently, in the production of goods, not all components are
produced locally. Many are sourced from overseas. Of importance is
the brand name of the product. There are many well-known brands in the
world that have components made in Malaysia. However, these products
are not regarded as Malaysian products.
62. We must also have Malaysian brands even though they may
use components from other countries. It is also necessary to create as
well as design Malaysian brands that can be marketed abroad. Western
brands are not always necessary. Today, Hitachi, Honda, Toyota,
Hyundai, Samsung and many others are well known in the world. It is,
therefore, not impossible for Malaysian brands in our language to be
accepted globally.
63. We must further enhance our trade by exporting goods and
services produced by Malaysians. However, we do not have to reduce
the export of goods by foreign investors in the country. The involvement
of Malaysians in the production of all goods and services in industries
must be increased. They must also manage by themselves all aspects of
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trade, both for domestic and foreign markets. The Government will
provide support in terms of putting in place appropriate policies and
funds as well as improving the delivery system.
Strengthening Small and Medium Industries
Mr. Speaker Sir,
64. The Government continues to give focus on the development
of small and medium industries (SMIs) as part of its efforts to promote
private investment. SMIs will be further developed not only to support
large domestic industries, but also to produce components for industries
abroad. The Government has established a Micro-Credit Scheme under
the Package of New Strategies to provide easier accessibility to loans for
small entrepreneurs, such as farmers, cattle rearers, night market
traders, hawkers and others. The response to the Scheme has been
overwhelming.
65. To date, Bank Pertanian Malaysia (BPM) and Bank
Simpanan Nasional (BSN) have received almost 88,000 applications
worth RM1.4 billion, of which nearly 42,000 applications valued at
RM430 million have been approved. Loan repayments have also been
encouraging, with almost 86% of schedulled repayment being received.
The Government is encouraged with this response. However, there are
a few who have abused and misused this facility. To those who have
received these loans, they must ensure that they repay on schedule. We
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must be reminded by the saying of the Prophet that it is indeed a cardinal
sin for one to leave debts behind upon death, with no one to settle them.
Stimulating Private Consumption
66. One of the measures to stimulate economic activities is to
encourage greater domestic consumer spending. Every ringgit that is
spent will generate significant multiplier impact on the economy.
Towards this end, the Government has introduced various measures to
increase disposable income through tax cuts and provision of incentives,
reduction in the employee’s contribution to EPF as well as providing
bonus for Government employees when our financial position permits. In
addition, our national savings rate at 32% further strengthens our
financial position. The ringgit peg has ensured stability in our purchasing
power.
67. The ability to balance savings with investment reflects sound
financial management. This is the best financial practice.
Enhancing Competitiveness to Face Challenges of Globalisation
Mr. Speaker Sir,
68. Globalisation as presently interpreted means the free flow of
trade across boundaries. The Government cannot intervene in the
market system. The market is supposedly able to regulate itself.
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69. In fact, the market is only interested in reaping huge profits.
As such, the developed countries have formed larger companies and
banks to overcome competition by traders of developing countries. It is
not possible for the small companies and banks in developing countries
to withstand the onslaught of giant companies when they have access to
domestic markets as a result of globalisation. This is not a level playing
field. Once again, might is right is the belief of the day.
70. We support globalisation but not as advocated by the West.
We must have our own interpretation of globalisation, which we will
pursue relentlessly until its acceptance in WTO.
71. We must persevere and stand up to face these challenges.
We must enhance our sovereign competitive edge to enable us to
compete with global players in the international market. This can only be
achieved through increasing productivity, reducing the cost of doing
business, acquiring technology and be more innovative. Efforts to
improve the effectiveness of the public sector delivery system have
contributed towards the efficient implementation of Government
development policies and strategies. In addition, measures must be
taken to effect a shift in the mindset of Malaysians to enable us to
become more competitive.
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BUDGET STRATEGY 2004
Mr. Speaker Sir,
72. The Government has taken prompt and bold measures to
implement policy shifts from growth that is solely based on exports to
domestic-led growth. The shift in policy has succeeded in preventing the
country from experiencing recession. As such, the thrust of the 2004
Budget will continue with policies and strategies to stimulate and
accelerate domestic economic activities, with greater participation of
Malaysians in economic growth. However, the Government cannot
continue to be the engine of growth. As such, the Government
introduced the Package of New Strategies to enable the private sector to
resume its role as the engine of growth.
73. Taking these into consideration, the 2004 Budget will focus
on the following strategies:
First : Accelerating domestic private sector and
stimulating the services sector to spearhead
economic growth.
Second : Implementing fiscal consolidation towards a
balanced budget in the near term.
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Third : Implementing monetary policy that can support
and harness private consumption and investment.
Fourth : Enhancing the nation’s competitiveness to enable
Malaysia to become a truly trading nation.
Fifth : Strengthening the social agenda and caring
society to enhance the quality of life and well-
being of Malaysians.
First Strategy: Domestic Private Sector as the Engine of Growth
Mr. Speaker Sir,
74. During the ten years prior to the financial crisis, the private
sector had been successful in driving economic growth with their
investment expanding by more 21% per annum. A major contributor to
this growth was from foreign direct investment (FDI), particularly in the
manufacturing sector. Indeed, almost 90% of our exports are goods
produced by foreign companies in Malaysia.
75. Foreign companies in Malaysia finance their investments
largely from our domestic sources. As such, the inflow of foreign capital
into the country is actually smaller than perceived. Furthermore, these
companies do not produce Malaysian brands, have low backward and
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forward linkages and utilise foreign technology developed abroad. The
main contribution of FDI has only been in terms of job creation. But
today, since Malaysians are fully employed, it only benefits foreign
workers.
76. We must change all these and be bold enough to transform
the economy from being FDI-driven to domestic-led investment. We
must act immediately to make a quantum leap to become the nation’s
investor, producer and exporter. Our domestic private sector must
develop and produce Malaysian brands of world-class quality, able to
penetrate international markets. We must export goods, which we
produce ourselves. We must promote private sector initiatives to
produce local products with high value creation, beginning from our own
research findings to utilising local components as well as domestic
logistics. This will ensure wider spin-off effects and higher wealth
creation for all Malaysians.
77. We must redouble our efforts to become a global trader by
promoting Malaysian products directly to a wider international market, in
particular non-traditional markets. As one of the strategic measures
towards this goal, MATRADE will be corporatised. MATRADE will bring
in expertise from the private sector, including expatriates in the
promotion of exports. For this purpose, the Government will provide a
launching grant of RM100 million. MATRADE will immediately undertake
roadshows, including export promotion on wheels to the Middle East and
Africa. In addition, the Government will also encourage private sector
28
initiatives to establish trading houses for our exports. The Government
will identify and assist capable individuals and private companies to
undertake these initiatives.
Mr. Speaker Sir,
78. SMIs can contribute to economic growth. They also have the
potential to produce high quality and value-added products, which can be
exported. A strategic direction for the development of SMIs must be
formulated not only to enable them to be the backbone of large industries
but also able to export their own products abroad. Towards this end, a
High-Level SMI Council has been established to formulate
comprehensive policies and strategies to ensure a more integrated
development of SMIs in all sectors.
79. To encourage SMIs to increase their investments, the
Government proposes to increase the threshold of chargeable income
that is subject to a corporate tax of 20% as announced in the 2003
Budget, from RM100,000 to RM500,000. With this increase, SMIs will
have an additional RM322 million for reinvestment.
80. To further strengthen the role of private sector, the
Government proposes the following measures:
i. providing existing locally owned companies, which
reinvest in the production of machinery and equipment,
29
including heavy machinery and machine tools, with the
following incentives:
a. Pioneer Status with tax exemption of 70% on the
increased income from reinvestment for a period of 5
years; and
b. Investment Tax Allowance of 60% on the additional
investment for a period of 5 years;
ii. enhancing incentives for companies producing goods
using oil palm biomass as follows:
a. increasing the rate of income tax exemption under
Pioneer Status from 70% for 5 years to 100% for 10
years; and
b. increasing the rate of Investment Tax Allowance from
60% to 100% for 5 years;
iii. providing existing companies using oil palm biomass with
the following incentives:
a. Pioneer Status with tax exemption of 100% for 10
years on the increased income from reinvestment;
and
30
b. Investment Tax Allowance of 100% for 5 years on
additional investment;
iv. improving tax incentives for companies in Sabah, Sarawak
and the eastern corridor of Peninsular Malaysia as follows:
a. increasing the rate of income tax exemption under the
Pioneer Status from 85% to 100%; and
b. increasing the rate of Investment Tax Allowance from
80% to 100%. This allowance can be fully deducted
and not limited to 85% of the statutory income; and
v. exempting tax on income remitted from abroad by
individuals, as presently enjoyed by companies. It is
hoped that this measure would encourage individuals to
remit their income from their investments or savings
abroad for domestic investment.
81. To further promote the development of private venture capital
companies, the venture capital fund for Malaysian Venture Capital
Management (MAVCAP) will be increased by RM300 million, thereby
increasing the total amount of funds under MAVCAP to RM800 million. In
addition, the Government has established the Malaysian Debt Venture
(MDV) with a fund of RM650 million and the Malaysian Technology
31
Development Corporation (MTDC) with a fund of RM1 billion to finance
investment in areas, such as logistics and modernisation of agriculture.
82. The Government has also granted income tax deduction to
venture capital companies equivalent to their investments in venture
companies, provided the shares in venture companies are disposed
through initial public offerings (IPOs). To further enhance this incentive,
tax deduction will be allowed for shares disposed through other approved
exit mechanisms, such as put option and management buyout.
83. Apart from this, the method of computing the 70% investment
in venture companies will be relaxed to take into account the amount of
funds invested instead of the total funds of the venture capital company.
84. In addition, the Government also proposes that venture
capital management companies be given tax exemption on income
received from profit sharing agreements with venture capital companies.
Stimulating the Services Sector
Mr. Speaker Sir,
85. The services sector is a major contributor to economic growth
and foreign exchange earnings. The potential sources of growth in this
sector has yet to be fully exploited to produce high value-added services,
32
especially those services related to manufacturing, education, tourism,
transportation and logistics as well as ICT.
86. In the past, the flow of FDI had focussed on the
manufacturing sector. We must now undertake efforts to attract FDI to
the services sector, especially those with high value-added potentials
through incentives. In the Package of New Strategies, we have further
relaxed equity conditions, apart from providing many tax incentives to
attract services-oriented companies, such as Operational Headquarters
(OHQs), Regional Distribution Centres (RDCs) and back-room
outsourcing operations by multinational companies (MNCs) to operate in
this country.
87. The Multimedia Development Corporation (MDC), as a one-
stop shop for investment in the MSC has succeeded in attracting many
local and foreign companies to invest in ICT. For companies granted with
MSC status, the Government has given 10 commitments under the Bill of
Guarantees, including the provision of infrastructure, freedom of
ownership and sourcing of funds as well as recruitment of knowledge
workers, regardless of citizenship.
88. MDC has successfully attracted and encouraged companies
to provide shared services, especially for IT support services for their
global operations, including information and data processing centres.
Recently, Ericsson established its headquarters here, while HSBC and
Standard Chartered Bank, among the largest banking and financial
33
institutions in the world, set up their electronic data processing offices to
provide back-end processing and customer contact services to their
groups worldwide. Shell, a major petroleum company in the world and
also DHL have created similar services in MSC. These activities have
succeeded in providing employment opportunities for highly qualified
Malaysian professionals.
89. To further stimulate the services sector, it is timely that a one-
stop agency be set up to hand-hold and guide investors in obtaining
approvals from various authorities, with the view to expediting their
project implementation. In view of the success of MDC in developing
MSC, the Government will expand its role to become a one-stop agency
ala MIDA for selected services sectors. We are confident that MDC will
be able to undertake its new role effectively.
90. The financial sub-sector, with a contribution of 14.5% to the
GDP, is one of the major components of the services sector. In line with
the objective to make Malaysia a regional financial centre, the
Government will allow Labuan offshore companies to establish their
marketing offices in Johor Bahru, which is rapidly developing with the
increasing number of MNCs that have relocated their operations there.
This measure will also complement the Government’s efforts in making
the Port of Tanjung Pelepas and the Senai Airport as an international
logistics hub.
34
Mr. Speaker Sir,
91. To further enhance the incentives for OHQs, the Government
proposes that income derived by OHQs from the provision of services to
its related companies in Malaysia, will be given income tax exemption
not exceeding 20% of its total income from its global operations. This is
similar to the incentive currently enjoyed by RDCs.
Promoting Malaysian Industries In The Global Market
Mr. Speaker Sir,
92. While the nation’s exports are high, we must focus on the
production of goods and services by our domestic entrepreneurs for both
the domestic and export markets. If we ourselves are not keen to buy our
own locally produced goods and services, it will be difficult for our
producers and businessmen to market their products abroad. Efforts to
develop domestic products with export potentials must be made an
important national agenda. To further promote local products, a Fund for
the Development and Promotion of Malaysian Brands has been
established with an initial allocation of RM100 million. The Government
will further increase the Fund by an additional RM100 million.
93. To enhance demand for local goods and services, the
Government and the private sector must together increase the
consumption of local products to ensure these products have a strong
35
domestic market base. In other countries, the domestic market has
provided the base for local industries to venture into the global market.
We must emulate these countries to spearhead the growth of our
domestic industries.
94. In order to promote domestic heavy industries, the
Government will continue to support such industries. Since February
2003, sales of passenger cars have been declining, as consumers are
postponing their purchases in anticipation of lower prices on imported
cars when the automotive sector is liberalised under AFTA. The
Government has indicated earlier that the prices of cars will not be
lowered even after the reduction of import duties on cars from ASEAN
countries. To mitigate the loss in revenue, the Government proposes to
levy excise duties on imported cars when import duties are reduced from
1 January 2004. Therefore, consumers are encouraged to purchase cars
now for themselves and their families.
95. The Government will also review its procurement system.
Presently, the evaluation of Government tenders focusses on two
aspects, namely technical and financial. To provide a market base for
our entrepreneurs, the use of local content and value-added will be given
due consideration in the Government’s tender evaluation.
96. The agenda to promote domestic industries is of utmost
importance. As such, the Government will require Tenaga Nasional,
Telekom, Proton and Petronas as well as the stable of companies under
36
Khazanah and PNB and other Government companies to spearhead the
development of domestic products and technologies in their respective
sectors. These companies must take advantage of their domestic market
and their global network as well as funds to promote domestic industries,
capable of competing in the international market. In line with this policy,
the vendor and umbrella system will be reviewed.
97. The Government hopes that our private sector companies will
take this challenge and work towards developing domestic industries that
can compete globally. In this regard, the Government will ensure a
conducive environment, including development of R&D, provision of
funds, increased promotional and marketing efforts, provision of logistics
services and improved public sector delivery system, in line with the
objective of achieving sovereign competitiveness.
98. The Government is committed to the New Economic Policy
(NEP) launched in 1971, including the creation of a Bumiputera
Commercial and Industrial Community or BCIC, to provide opportunities
for Bumiputera to succeed as entrepreneurs. The policy has produced
many successful Bumiputera entrepreneurs and corporate leaders.
However, the financial crisis had adversely affected them. This is one
aspect of the NEP that has not been fully achieved. As such, the
Government through its own companies will intensify efforts towards
achieving this objective, especially through the vendor and umbrella
system, which will be reviewed.
37
99. In this regard, we strongly oppose the agenda to open up
markets for Government procurement, which is being discussed at the
WTO forum in Cancun. Once again, the West is using the WTO to push
forward their agenda for economic colonisation. If we do not oppose this
agenda, our efforts to implement the National Development Policy, which
safeguards the interests of domestic entrepreneurs, including
Bumiputera as well as the objective of promoting domestic industries, will
not be achieved.
100. To enable us to produce quality products that can compete in
the global market, we must have appropriate technologies as well as
develop our own patents and brands. Apart from developing our own
technologies, patents, products and brands, we can also acquire them
from abroad. In the automobile industry, we have succeeded in acquiring
Lotus, while in the aerospace industry we have acquired Eagle and
Lance Air (USA), which produce twin and four-seater aeroplanes using
composite materials. InventQJaya was also established to promote a
society of inventors that can develop new frontier technologies.
Recently, we have also acquired the MM chip from a Japanese R&D
company, FEC Incorporated. The MM chip is the smallest in the world
measuring 0.25 square milimetres. In addition, Malaysian-owned
companies have also been successful internationally, such as fashion
design and shoes. Malaysians also own the London Circus, the largest in
the world, as well as Laura Ashley and Crabtree & Evelyn and others.
38
101. To enable Malaysians to venture into latest technologies,
measures are being taken to develop the aerospace industry. Three
years ago, the Government successfully launched Tiungsat and will soon
launch the Razaksat. This success will enable us to launch additional
satellites, including low-orbit equatorial satellite and the possibility of
establishing Malaysia as a rocket launching centre. We also hope to
send the first Malaysian astronaut into space. Malaysia Boleh.
Second Strategy: Fiscal Consolidation Towards A Balanced Budget
Mr. Speaker Sir,
102. When the 8thMP was formulated, the Government had
targetted achieving a balanced budget by 2005. However, the sharp
decline in private sector activities following the regional financial crisis,
uncertainties in the external environment, including the September 11
incident, geo-political tensions in the Middle East, war in Iraq and the
outbreak of SARS, had necessitated the Government to implement
several stimulus packages to revitalise domestic economic activities to
prevent the economy from going into recession. As such, the objective of
a balanced budget cannot be achieved in 2005. However, the
Government remains committed to achieve a balanced budget in the
near term by implementing fiscal consolidation measures.
Notwithstanding this, the public sector account remains strong, with the
public sector deficit below 1.5% of GDP in 2003, significantly lower than
39
the 3% set for the euro region. The increase in public sector deficit is due
to large investments by Petronas in 2003.
103. Government expenditure will focus, especially on the
provision of more efficient infrastructure facilities to reduce the cost of
doing business and support economic growth. Allocations will continue to
be provided for the implementation of programmes to improve the socio-
economic well-being of Malaysians. In this regard, emphasis will be
given to the provision of goods and social services for the benefit of all
Malaysians, especially the lower income group.
104. To ensure effective distribution of Government funds,
allocations to Government agencies will be based on their financial
positions. Agencies with high uncommitted reserves will have to utilise
their reserves to finance their programmes.
Streamlining Budget Preparation and Implementation
105. To streamline Budget preparation, the Government has
implemented the two-year budget preparation and examination since
Budget 2002. This process has enabled the preparation of a rolling plan,
which incorporates current and following year budgetary requirements. It
also shortens the time and reduces man-hours required for budget
examination and thus, enables agencies to focus on implementation.
40
106. The adoption of the two-year budget has contributed towards
expediting the implementation of development projects where agencies
have lead time to undertake project planning. With the speedier
implementation of development projects, there is no shortfall in
expenditure as in previous years.
Budget Allocation 2004
107. In line with the fiscal consolidation policy, the Government
proposes an amount of RM112.5 billion be appropriated for, in the 2004
Budget. This represents a reduction of 1.6% compared with an
expenditure of RM114.3 billion in 2003. Based on an estimated revenue
of RM95.6 billion, the overall Federal Government deficit is expected to
be reduced to 3.3% of GDP compared with 5.4% in 2003.
108. A major portion of the proposed allocation, that is RM80.5
billion or 71.6% is for Operating Expenditure while RM30 billion is for
Development Expenditure. A sum of RM2 billion is allocated for
contingency reserve.
109. Under the Operating Expenditure, a sum of RM20.9 billion is
for Emoluments, RM17.2 billion for Services and Supplies and RM39.4
billion for Fixed Payments and Grants, RM0.8 billion for purchase of
office equipment and facilities and RM2.2 billion for other expenditures.
41
110. Of the proposed Development Expenditure, a sum of RM13.8
billion or 43.1% is allocated for the economic, infrastructure and
industrial sectors as well as rural electricity and water supply
programmes. A sum of RM11.2 billion or 34.9% is for the social sector,
that is education and training, health, welfare, community development,
youth and sports projects. In addition, a sum of RM2.7 billion or 8.4% is
for development projects in the security sector and RM4.3 billion or
13.6% for general services.
Education
Mr. Speaker Sir,
111. The Government will continue to give priority to the education
sector with an allocation of RM20.2 billion or a quarter of operating
expenditure in 2004. Among the educational institutions, which are
expected to commence operations are 44 primary, 43 secondary and 3
technical schools as well as 59 hostels. As announced in the Package of
New Strategies, 4 education promotion offices will be operational this
year in Dubai, Ho Chi Minh, Beijing and Jakarta.
112. Under the Development Expenditure, a sum of RM3.7 billion
is provided, including RM1.8 billion for primary and secondary schools,
hostels and teachers’ quarters. A sum of RM637 million is allocated for
school computerisation programmes while RM490 million is for financing
infrastructure requirements of public institutions of higher learning.
42
113. Last year, the Government decided to implement the
teaching of Science and Mathematics in English using ICT. This
programme involves an expenditure of RM5 billion for the 8thMP period.
The Government will also roll-out smart school programmes in stages
and implement the Schoolnet project to enable students to gain wider
internet access. This programme has been implemented in almost 200
schools in remote areas of Sabah and Sarawak.
114. In line with the Government’s objective to provide compulsory
basic education for all children, a Trust Fund for Poor Students was
launched on 23 July 2003. An amount of RM200 million is allocated to
the Fund to assist poor students to continue with their education.
115. To enhance the quality and standard of franchised education
programmes, the National Accreditation Board, will invite lecturers or
experts from public or private institutions of higher learning to assist in
undertaking validation, moderation or accreditation of the programmes.
This is to ensure that the quality of courses offered are at par with those
from foreign universities. For this purpose, the Government proposes
that fees or honorarium received by these lecturers or experts who assist
in validation, moderation or accreditation, be exempted from income tax.
116. To reduce the financial burden of graduates in loan
repayment to Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN),
the Government will reduce the rate of interest on loans from 4% to 3%.
43
The repayment schedule will commence on the third year after the
graduate is employed. In addition, the repayment schedule will also be
restructured to enable borrowers to repay their loans at 5% of their
monthly income for the first 5 years and 10% for the balance of the
repayment period. This facility will also be extended to borrowers under
the Skills Development Fund. For students who wish to pursue Islamic
studies in institutions of higher learning abroad, they will also be able to
borrow from PTPTN on the condition these institutions are recognised by
the Government and they must enrol in academic subjects. They must
also possess qualifications recognised by the Government. The amount
of loans should not exceed the cost of similar courses in local
institutions. Apart from this, the Government will also consider extending
this loan facility to students pursuing twinning programmes abroad for
the final year of their studies in institutions of higher learning recognised
by the Government and in courses encouraged by the Government.
Skills Training
117. The development of technology and knowledge-based
industries requires more trained manpower. For this purpose, the
Government will continue to give emphasis on increasing the quality and
quantity of skilled manpower by further expanding existing facilities and
building new skills training centres. An allocation of RM319 million is
provided under the Ministry of Human Resources (MHR) for this
purpose. With an additional 10 new training institutions, MHR will have
the capacity to train 17,000 trainees in various skills. A sum of RM245.5
44
million is also allocated to provide additional facilities and build 25
National Youth Skills Institutes that can train 11,000 trainees. A sum of
RM77.5 million is provided to complete 14 existing institutes and build 3
new institutes and RM107.3 million to meet the management costs of
Mara Skills Institutes.
118. The Government launched the Skills Development Fund
under the Package of New Strategies with an amount of RM500 million
to increase the supply of skilled manpower. The Fund provides loans to
trainees from skills training institutes, such as Industrial Training
Institutes, MARA Skills Institutes, National Youth Skills Institutes and
other selected private institutes. To manage this Fund, a special agency
ala PTPTN will be established. The loan condition under this Fund is
similar to that of PTPTN, with an interest rate of 3%. The monthly
repayment schedule will be made in stages.
119. To further expand technical training facilities, an engineering
training centre for Computer Numerically Controlled (CNC) machines has
been established at the Technology Park Malaysia. This Centre provides
training on the use and design of CNC machines for various industries,
especially components and spare parts. This training will contribute
towards the upgrading of skills in CAD/CAM/CAE.
120. Community colleges will also provide vocational training.
Pusat Giat MARA will be upgraded as Community Colleges with
emphasis on vocational training with the view to providing more skills
45
training opportunities. Government-owned companies, such as TNB and
Telekom will also provide technical and vocational training at their
training centres. Participants in these training programmes can obtain
loans from the Skills Development Fund. In addition, to encourage
employers to hire unemployed graduates registered with the Economic
Planning Unit (EPU), the Government proposes that expenses incurred
by employers in employing these graduates be given double tax
deduction for a period of 2 years. For unemployed graduates requiring
retraining, they can obtain financing from the Retraining Fund under the
Package of New Strategies.
Research and Development (R&D) Mr. Speaker Sir, 121. The Second National Science and Technology Policy was
formulated to achieve R&D expenditure of at least 1.5% of GDP by 2010.
Towards this end, the Government has provided substantial allocation to
develop expertise and expand R&D facilities. To continue with these
efforts, a sum of RM183.6 million is allocated for the Intensification of
Research in Priority Areas (IRPA) programme, specifically for public
research institutions in collaboration with the private sector. In addition,
three new research institutions will be established in the BioValley,
Cyberjaya, specifically in biotechnology. The Government will encourage
large companies to locate in the BioValley to undertake contract
research as part of the efforts to further develop the services industry.
46
122. Our R&D efforts have contributed significantly to increases in
yield of commodities, especially oil palm and rubber. The yield of
commodities per hectare has doubled and their maturity period
shortened. Apart from increasing output, research institutions have also
undertaken downstream research, such as biodiesel from oil palm and
rubber thermoplastic.
123. In the light of declining contribution of commodities to the
economy, it is timely that R&D institutions refocus their efforts towards
greater demand and market-driven R&D that emphasise value-added or
value creation, with the view of commercialising their research findings.
For example, the global market for healthcare and life sciences products
and services is expected to reach 4 trillion euros while pharmaceuticals
30 billion euros by 2006. In Malaysia, biotechnology is still an infant
industry. Although currently there are about 60 biotechnology
companies, they are still small and have yet to reach world-class status.
124. The Government will restructure SIRIM to become the focal
point to match R&D with market demand. SIRIM will identify the
requirements for new products and technology for both the domestic and
global markets. It will also study the whole R&D value chain to create
value, including niche activities to be developed, such as logistics,
packaging and marketing.
47
125. The Government through SIRIM will also identify R&D
requirements based on market demand and match them with R&D
capacity in universities and research institutions. As this represents a
long-term investment in developing our local technology to produce high
quality Malaysian brands, the Government will provide adequate funds
for this purpose. The nation has the expertise and capacity to undertake
R&D to meet market demand. For example, we have more than one
thousand doctorates, apart from adequate facilities and funding for R&D.
126. To promote the commercialisation of research findings, the
Government proposes that income received by researchers from such
activity be given tax exemption of 50% for 5 years. At the same time, the
Government will not impose charges on patents registered by local
researchers.
Tourism
Mr. Speaker Sir
127. The tourism sector, especially hotel and tour operators, has
been adversely affected by the Iraq war and the outbreak of SARS. To
assist them, the Government had implemented prompt measures under
the Package of New Strategies, such as the deferment of income tax
payment by tour agencies, discounts on electricity bills to hotel operators
and the provision of the Special Relief Guarantee Facility.
48
128. To encourage operators in the tourism industry, including
hotel operators, to undertake expansion, modernisation and renovation,
the Government proposes that a second round of Pioneer Status or
Investment Tax Allowance be given.
129. Hotel operators should work together to set up tourism
information centres at all entry points, including airports as well as major
railway stations to enable tourists to make hotel reservations upon
arrival. They are also encouraged to provide on-line reservation facilities.
For this purpose, the Government will develop portals and provide
access to these portals at airports, railway and bus stations throughout
the country.
130. The Government will continue to undertake more effective
tourism promotion efforts together with Malaysia Airlines and AirAsia as
well as tour agencies. For this purpose, the Malaysian Tourism
Promotion Board (MTPB) will be restructured to undertake a more
systematic and effective marketing and communications programmes. In
addition, promotional efforts will focus on regional markets, especially
China, Taiwan, Hong Kong, India and ASEAN countries. Promotional
efforts will also be intensified in the West Asian market and new markets
such as Pakistan, Indo-China and New Zealand. In this respect, a sum of
RM215 million will be allocated for promotional activities.
131. The Government has also established tourism funds
amounting to RM1.1 billion, that is RM400 million under the Special
49
Tourism Fund and RM700 million under the Tourism Infrastructure Fund.
Both these funds are managed by Bank Pembangunan dan Infrastruktur
Malaysia (BPIMB). Priority will be given to the financing of new tourism
products. To increase its effectiveness, the Government through the
Ministry of Finance will monitor its implementation with respect to
approvals and disbursements of the funds.
132. Malaysia Truly Asia. This theme does not only reflect the
multi-ethnic and multi-cultural society but also the variety of Malaysian
cuisine, which has become a tourist attraction. We have Bintang Walk,
Bangsar Baru and Mon’t Kiara, where tourists spend their time along
sidewalk cafes. Such places have also become the happening place. In
this regard, we must also ensure our food traders have stalls that are
attractive, clean and hygienic. Towards this end, the Government has
provided micro-credit facilities to enable them to replace their stalls with
new pushcarts made of stainless steel as well as colourful canopies and
proper tables and chairs ala Bintang Walk. In this regard, traders will only
be allowed to use stalls or pushcarts approved by Local Authorities.
Health
Mr. Speaker Sir,
133. The Government will continue to provide quality medical
services to all Malaysians. Hence, the Government will allocate a sum of
RM9 billion, an increase of 20.5% from 2003. Of this, RM6.4 billion is for
50
operating expenses and RM2.6 billion for development expenditure. This
allocation is for the provision of essential medical treatment services,
such as dialysis, intensive care and programmes to reduce morbidity and
mortality among children. To increase the diagnosis and monitoring of
infectious diseases, such as SARS, tuberculosis, leprosy and dengue,
the Government will provide a sum of RM3 million.
134. The cost of medical treatment is rising. The Government
subsidises health services to ensure Malaysians are charged at
minimum rates. However, this has become an increasing financial
burden for the Government. To assist the Government to reduce this
burden, the health insurance industry is encouraged to widen its
coverage by providing lower premiums, which are affordable to a
majority of Malaysians. In addition, companies must also bear the
medical costs of their employees.
135. The Government has built many hospitals with modern and
sophisticated equipment, including the application of ICT for the
paperless Total Health Information System (THIS). This includes
Hospital Selayang, Serdang and Pandan in Johor. The Government is
not able to provide high remunerations for medical specialists. As such,
the Government has agreed to set up private commercial wings in
Government hospitals, to enable serving doctors to enjoy better
remunerations and thereby, continue to serve with the Government.
Through these measures, the Government also hopes to attract
specialists who have left the service to return and serve in Government
51
hospitals. In addition, this will enable those seeking better medical
treatment to obtain such treatment at reasonable charges in Government
hospitals. It will also enable our Government hospitals to be promoted
abroad, in line with the objective to encourage health tourism.
136. Healthcare is vital to ensure the well-being of the people. To
improve healthcare, the Government proposes that import duty of 10%
on health supplements be abolished. The Government shall also ensure
prices of selected medicines be provided at a discount to pensioners. In
this matter, Pharma Niaga will provide a special counter for this purpose.
137. At the same time, to encourage healthy lifestyle among
Malaysians, the Government proposes that import and excise duties on
cigarettes and other tobacco products be increased by 20%, from
RM216 to RM259 per kilogramme and from RM48 to RM58 per
kilogramme, respectively. This increase is in line with World Health
Organisation’s proposal to discourage smoking. To curb smuggling of
cigarettes, the Government is implementing the use of special stickers or
banderol and security ink.
138. The Government also proposes that import and excise duties
on liquor be increased by 10%. In addition, the Government will also
implement the use of banderol and security ink on liquor.
139. The Government would like to take this opportunity to
congratulate and record our appreciation to all medical staff who had
52
sacrificed and took risks during the screening of visitors and treating
SARS patients. The special allowance provided is only a small token of
the Government’s appreciation. It cannot compare with their untiring
efforts and unwavering dedication in carrying out their duties. We all
should emulate them.
140. Even though the SARS outbreak has ended, we must
continue to be vigilant and be prepared in case of recurrence. The
Government will continue with its efforts to put in place measures to
prevent such diseases. In this regard, the Government will expedite the
establishment of the Centre for Disease Control (CDC), as announced in
the Package of New Strategies. A sum of RM20 million is provided for
this purpose.
Rural Development
Mr. Speaker Sir,
141. Efforts to enhance the standard of living of the rural
community will be continued. A sum of RM2.27 billion is provided for
rural development, of which RM450 million is for the construction of
village roads, while a sum of RM260 million for the completion of 74
continuation and new projects. An amount of RM267.1 million is provided
for the completion of rural clinics.
53
142. A sum of RM225.4 million and RM272 million is allocated for
the rural water and electricity programmes, respectively to benefit almost
140,000 households throughout the country. An allocation of RM7.9
million is provided for water projects as well as programmes to ensure
clean environment in rural areas. The coverage of potable water supply
has reached 99.9% for Peninsular Malaysia. In addition, RM242 million is
allocated to provide water supply to rural schools.
143. To reduce the financial burden of low-income groups, the
Government proposes that motorcycles of engine capacity not exceeding
150 c.c. be exempted from road tax. This will also reduce the financial
burden of youths and students in institutions of higher learning. The
Government also proposes that road tax on buses for workers, be
reduced by 50%. Employers are expected to pass on this benefit to their
employees.
Development of Sabah and Sarawak
Mr. Speaker Sir,
144. As in previous budgets, the development of Sabah and
Sarawak will continue to be given emphasis. A sum of RM5.9 billion and
RM5.5 billion is allocated to Sabah and Sarawak, respectively. These
states will have wider road networks connecting major towns. Presently,
several towns in Sabah can only be reached by air or river transport.
However, with the completion of these projects, all towns will be
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connected by road. In Sarawak, major road networks are being
constructed to facilitate communications not only in Sarawak but also
between Sabah and Sarawak. New bridges will also be built to replace
old ones to ensure greater safety. Apart from this, the implementation of
rural and village roads is being accelerated and being undertaken by
local contractors of all classes.
145. Given that Sabah and Sarawak are large states, several air
and sea transportation projects are being implemented. Apart from the
newly completed airports of Tawau, Bintulu and Miri that can
accommodate Airbus 330, the Kuching airport will also be upgraded. The
Bintulu and Kuching ports are also being expanded. The Government will
also build a new port in Semalanjau to cater for the aluminium smelting
plant. The plant, an investment from the Middle East, will also utilise a
large portion of electricity produced from the Bakun Hydroelectric project.
146. In the education and health sectors, Sabah and Sarawak will
also be given significant allocations to implement projects, such as
Phase 2 of the Universiti Malaysia Sabah and the construction of the
UNIMAS permanent campus in Samarahan. The Government has taken
over the Sabah Medical Centre from the private sector, which will be
upgraded to become a major hospital in Kota Kinabalu. In addition, with
the view to increasing the number of doctors and allied health services
personnel, the Kuching hospital will be upgraded to become a teaching
hospital for UNIMAS.
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147. Sabah and Sarawak have not enjoyed full coverage of rural
water supply. As an interim measure, the Government has implemented
rural water supply programmes, especially in schools, using rain
harvesting and tube well system. To date, almost 700 schools in Sabah
and Sarawak have been identified to benefit from these facilities, with a
cost of RM242 million.
Agriculture
148. The Government will continue to give emphasis to further
modernise the agriculture sector, in particular programmes to increase
food production. Towards this end, large-scale mixed farming will be
promoted, including animal husbandry, intensive farming as well as the
use of modern technology and management. To further promote greater
value-added chain in the agriculture sector, activities such as processing,
logistics, packaging, developing brand names and securing new markets
will be supported and encouraged. Towards this end, all activities in the
value chain, including delivery system, will be strengthened, particularly
the provision of cold storage chain facilities for perishable agricultural
products.
149. Companies which provide these facilities and services can
also utilise venture capital funds available from MTDC. In addition, new
companies which provide cold chain facilities and services for perishable
agricultural produce are given Pioneer Status or Investment Tax
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Allowance. To promote reinvestment in this field, the Government
proposes that existing locally owned companies be granted the following
incentives:
i. Pioneer Status with tax exemption of 70% on the
increased income from reinvestment for 5 years; and
ii. Investment Tax Allowance of 60% on the additional
investment for 5 years.
150. The Government has already established the Fund for Food
totalling RM1.3 billion under BPM to finance the production and
processing of food products. To date, this Fund has been fully utilised.
In view of the good response, the Government has provided an
additional RM1 billion under the Package of New Strategies, bringing the
total Fund to RM2.3 billion.
151. To further stimulate rural economic activities and assist small
entrepreneurs in villages, the Government will establish the Village
Micro-Credit Scheme amounting to RM1 billion under BPM. To ensure
efficient and effective implementation of this programme, this credit will
be provided on group basis through the Village Development Committee
for villages, which are involved in the one product one village
programme. The implementation of this Scheme will be supervised by
the District Development Committee and the Implementation and
Coordination Unit, Prime Minister’s Department. The objective of the
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Scheme is to provide opportunities to farmers to gainfully utilise their free
time and increase their income.
152. An allocation of RM3.3 billion is provided for operating and
development expenditure for the agriculture sector. Of this, RM885
million is for the provision of basic agricultural facilities. In addition,
aquaculture farming will be expanded, with an allocation of RM70.6
million, while RM165 million is for the construction of an Integrated Deep
Sea Fishing Port and a Fisheries Training Centre in Tanjung Manis,
Sarawak.
Increasing Orang Asli Participation in Mainstream Development
153. The Government continues to undertake programmes with
the view to enhancing greater participation of orang asli in national
economic development. As a measure to increase their income, the
Village Micro-Credit Scheme will also be extended to enable them to
undertake economic activities, including agriculture and small
businesses. In addition, they will also be provided with hire-purchase
facilities for boats and outboard engines under the Package of New
Strategies. To enable orang asli to purchase comfortable and ffordable
homes, they will also be given priority under the SPNB low and medium-
cost housing scheme as well as the provision of soft loans to acquire
these homes.
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154. An allocation of RM156.5 million is provided for the
implementation of programmes for orang asli. These include Rancangan
Pengumpulan Semula, Penyusunan Semula Kampung, and economic
development activities, such as entrepreneur and skills training. In
addition, for orang asli children, assistance such as school uniforms,
textbooks and bus fares have been provided.
Increasing Security Mr. Speaker Sir,
155. Recently, there has been a spate of hijacking, piracy and
gangsterism, including “tonto” activities as well as robberies and thefts.
To overcome these problems, the Government will increase and
strengthen security and enforcement. The police force will step up their
security surveillance throughout the country. The Government will review
several departments of the Royal Malaysian Police with the view to
increasing their capacity and effectiveness through the provision of
equipment and special training. Apart from this, the Government has also
established the Malaysian Maritime Enforcement Force (APMM) in its
efforts to increase surveillance in our waters, such as the Straits of
Malacca.
156. It is the responsibility of the Government to provide a safe
environment for the public and businesses. To ensure the safety of
enforcement officers in various agencies, they will be supplied with
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appropriate equipment while on duty. In appreciation of their services,
the benefits and remunerations provided to security personnel and their
families will also be extended to enforcement officers if they are injured
or die in the line of duty.
157. A sum of RM4.4 billion for operating expenditure is provided for
internal security while RM6.5 billion is allocated to the Ministry of
Defence for 2004. For development expenditure, allocations of RM750.5
million and RM2.1 billion have been provided, respectively to equip and
modernise the defence and security systems of the nation.
Third Strategy: Monetary Policy to Support Private Consumption and Investment
Mr. Speaker Sir,
158. Accommodative monetary policy will continue to be
implemented to promote domestic activities, in particular consumption
and investment. The Government will continue to maintain this policy,
especially given the low interest rate regime in the world. In addition,
there exists high liquidity in the system that can be mobilised to finance
domestic economic activities. As such, measures to manage this liquidity
will be put in place so as to ensure it will be utilised more efficiently to
stimulate domestic investment and consumption.
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Easier Access to Financing for SMIs
159. Small and medium industries (SMIs) need to be further
promoted to generate greater domestic investment activities. To further
strengthen their role, it is imperative for financial institutions to provide
greater access to finance and credit facilities to the SMIs. In addition to
financial facilities provided by the Government under the Package of
New Strategies, banking institutions must be pro-active in providing
loans, especially to small and medium businesses.
160. Given the good response from small businesses to the Micro-
Credit Scheme of BPM and BSN, the Government will provide an
additional RM1 billion to the Scheme.
161. The Government is also concerned over small and medium
businesses, which are facing difficulties in servicing their loans with
financial institutions. Under the Package of New Strategies, Bank Negara
Malaysia has established the Scheme to Restructure and Reschedule
Loans for all types of loans and credit facilities by borrowers in the
tourism sector. To date, loans amounting to RM3 billion have benefitted
from the Scheme.
162. In addition to this Scheme, the Government will also assist
SMIs to address their non-performing loans with financial institutions,
using a mechanism ala CDRC. Towards this end, BNM will establish the
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SMI Debt Restructuring Committee. It is the Government’s hope that this
mechanism will help to resolve the debts of SMIs.
Issuance of Merdeka Bonds 163. The Government is aware of the impact of the low interest
rates regime on groups whose income depend on savings in financial
institutions, that is pensioners aged 55 years and above who do not have
permanent jobs. To ensure that they receive higher returns, BNM will
issue serial bonds for this group with a maturity period of 2 years and a
return of 5% per year, higher than the interest rates on savings. The
Government proposes that the returns from these bonds be exempted
from income tax. In appreciation of the services and sacrifices of
uniformed personnel, this bond will also be extended to those who have
gone on mandatory retirement.
Expanding the Capital Market 164. The capital market continues to play an important role in
financing economic development, especially in terms of raising funds
from the market. Since 2001, more than RM99 billion have been sourced
from the capital market through the issuance of bonds and equities. In
addition, 13 asset-backed securities (ABS) valued at more than RM7
billion have been approved. This encouraging performance has been the
result of the implementation of initiatives under the Capital Market Master
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Plan as well as the 10 new measures introduced by the Government in
March this year to strengthen the capital market.
165. Currently, there is no specific income tax provision for ABS.
As a measure to promote financing through the issuance of ABS, the
Government proposes that ABS be given equal tax treatment as other
conventional securities. At the same time, the Government proposes that
expenses incurred in the issuance of ABS be granted tax deduction for 5
years.
166. One of the 10 measures implemented to strengthen the
capital market is to encourage large companies to be listed on the KLSE.
Towards this end, FELDA which is not only the largest plantation
company in this region but also in the world, will also be listed on the
KLSE. FELDA shares are expected to become one of the blue chips on
the KLSE and FELDA has the potential to be promoted as an
international brand. With the listing, FELDA will be able to tap funds
from the capital market and therefore, will no longer depend on the
Government for its financial requirements. At the same time, the
Government will be able to reap returns from this listing, while the
FELDA Group of companies, settlers, cooperatives as well as state
governments, which have provided land to be developed as FELDA
plantations, will also benefit. FELDA settlers will have the opportunity to
hold equity in the listed company as members of the cooperative and as
settlers.
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167. The proposal is in line with the objective of the NEP to enable
Bumiputera to own at least 30% of the equity in the corporate sector. It
is hoped that Bumiputera will not divest their shares.
168. After 46 years of independence, we must take cognisance of
our weaknesses and work towards rectifying them. As a measure to
further expand investment opportunities through trust funds, especially
for Bumiputera, a Second Unit Trust Fund or Dana Harapan (HARAPAN)
will be established. This Fund will be managed by professional and
experienced managers to mobilise Bumiputera savings and capital.
169. The Government has significant high-value assets, which
have not been fully utilised. To optimise returns, the Government will
undertake to unlock these assets so as to enhance its financial position.
It will also provide investment opportunities for investors to utilize these
assets to generate returns and contribute to economic growth.
Expanding the Islamic Financial System
170. Since its introduction in Malaysia in 1983, Islamic banking
has brought a new facet to the nation’s financial system. Malaysia is one
of the nations that has a comprehensive Islamic financial system. We
began with the establishment of Bank Islam and now Malaysia has two
Islamic banks and 33 conventional banks offering Islamic banking
services. The growth of Islamic banking also serves as a catalyst to the
rapid expansion of the Islamic financial system, comprising banking,
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insurance and the capital market. Total assets of the Islamic banking
system increased almost four-fold to RM68 billion in 2002 from RM17.9
billion in 1997.
171. Islamic insurance or takaful industry has emerged as another
Islamic financial product, which has expanded rapidly since its
introduction in 1986, with total assets increasing from RM200 million to
RM4 billion this year. Islamic private debt securities (PDS) have also
received encouraging response with issuance exceeding RM34 billion
since 2001. The net asset value of Islamic funds has also increased
more than two-fold to RM4.3 billion.
172. At the international level, Malaysia was the first country to
issue global Islamic bonds, Sukuk Al-Ijarah. The US$600 million bond
was twice over-subscribed. Another significant achievement was the
establishment of the Islamic Financial Services Board in Kuala Lumpur to
ensure stability and strengthen the global Islamic financial industry. With
these achievements, Malaysia has now become a model in the
expansion of the Islamic financial system among Islamic countries.
173. As a measure to increase financing through the issuance of
Islamic securities, the Government proposes that a more comprehensive
tax treatment be provided similar to conventional securities. In addition,
deductions will be given on expenses incurred in the issuance of Islamic
securities based on the principle of Istisna’ for 5 years, where property
under construction can also be used to back such bonds.
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174. To encourage companies and financial institutions which
practice Syariah principles to invest in Labuan, the Government
proposes that Labuan offshore companies be given tax rebate equivalent
to the total zakat paid, not exceeding RM20,000 or 3% of net profit.
Fourth Strategy: Enhancing the Nation’s Competitiveness
Mr. Speaker Sir,
175. Measures undertaken by the Government as well as
initiatives by the private sector to enhance efficiency and productivity
have contributed towards further strengthening the nation’s
competitiveness. Based on the 2003 World Competitiveness Yearbook,
among countries with 20 million and above population, Malaysia is
ranked fourth after the United States, Australia and Canada. This placing
is an improvement compared with the sixth position in 2002 and tenth in
2001. This improvement reflects the nation’s ability to compete in the
international market, attributable to the concerted efforts made by the
Government and the private sector since two decades ago.
176. The use of IT has become an integral part of business,
particularly high-speed internet access to enable the nation to become
more competitive. In addition more Malaysians, in particular the younger
generation are surfing the internet to acquire knowledge and obtain
66
current information. To ensure wider access to the internet at low cost,
Telekom Malaysia will reduce the internet access charges. In addition,
this reduction will promote e-commerce through wider and cheaper
access to broadband internet. Telekom Malaysia will provide 50%
discount for industrial and corporate package, beginning with 30% for
phase 1 and a further 20% for phase 2. For other users, a 30%
reduction will be given for consumer broadband internet charges.
177. To ensure wider and more efficient internet services, JARING
will be merged with TMNet. As Cyberjaya will become the hub for
selected services, accessibility and quality of broadband services will be
improved while the cost will be reduced to a more competitive level
compared with other countries.
178. In our efforts to further improve the nation’s competitiveness,
the private sector must continue to reduce the costs of doing business to
enable them to compete with lower cost manufacturers in other
countries. For this purpose, the Government has provided various
incentives, particularly in the Package of New Strategies. As a
continuous effort to achieve this, the Government proposes the following:
i. allowing full deduction on entertainment expenses
incurred in sales promotions and deduction of 50% on
other entertainment expenses;
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ii. abolishing the limit on the exemption period for import duty
and sales tax on spares and consumables for the
manufacturing and services sectors, which is due to expire
on 31 December 2003;
iii. extending deduction on incorporation expenses to
companies with authorised capital up to RM2.5 million,
currently enjoyed by those with authorised capital up to
RM250,000 only;
iv. reducing or abolishing import duties on selected goods
such as computer batteries, wooden and plastic goods,
from the current rates of between 5% and 30% to between
0% and 20%; and
v. reducing or abolishing export duties on several agricultural
produce and commodities, such as fish, fruits and certain
minerals, from the present rates of between 2.5% and
10% to between 0% and 5%.
179. The mass media industry has become an important sector to
create a knowledge society. It is proposed that local publishing and
printing companies be given exemption of anti-dumping duty on imported
newsprint on the quantity that cannot be supplied by local producer. This
exemption will render the cost in the publishing and printing industry to
be more competitive.
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Fifth Strategy: Strengthening Social Agenda And Caring Society
Mr. Speaker Sir,
180. Recently, almost every day, we read and hear about
incidences of social ills in the mass media, including the militant groups,
cold-blooded murders, kidnappings, secret societies, merciless acts of
loan sharks, incest, drugs and HIV/AIDS. Of greater concern are moral
decadence and incidence of crimes among youths, particularly school
children. We also hear of murders committed by under-aged children,
runaways among teenagers, extortion, truancy and gangsterism among
students.
181. Previously, we see such incidents only happening abroad,
through TV and newspapers. But they are now happening before our
own eyes, in our country. These are social ills resulting from the
unrestrained influence of television and the internet. Such influence has
adversely affected some segments of the Malaysian society as well as
destroyed our cultural values. Modern technology has been misused,
particularly by illegal VCD producers, who are only interested in reaping
profits without any regard for the negative influence on society.
182. The Government is determined to step up efforts to curb
social ills, particularly among the youths. Towards this end, the National
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Social Policy has been launched, with the objective to promote social
development based on noble values and self-enrichment to achieve unity
and stability, national resilience as well as the well-being of Malaysian
society. To enable a more integrated, strategic and comprehensive
approach to address social problems, the Government will establish 50
community service centres in areas with high incidence of crimes and
social problems. The Government urges NGOs and members of local
communities to work together to ensure the successful implementation of
the Policy.
Harmonious Families Basis for High Moral Values
183. We must intensify our efforts to combat social ills, particularly
among the youths, the potential leaders of the future. Efforts in building a
Malaysian society with high moral values are not the sole responsibility
of the Government. The family, particularly parents and the society must
share this responsibility in moulding youths with good behaviour, practise
healthy lifestyle, are disciplined and knowledgeable as well as the
assimilation of religious values. These values provide a strong
foundation to curb social problems and build a society that is truly
successful in all aspects of life.
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Recognising the Role of Women
Mr. Speaker Sir,
184. The role of women in moulding happy families and their
contribution in national economic and social development has always
been recognised. The success of women in balancing this dual role
cannot be denied and is indeed admirable. The responsibility of women
in nurturing families based on My Home My Heaven, begins from the
birth of a child till adulthood. Mothers play the key role in moulding and
inculcating good values in children so as to become knowledgeable and
devoted to family and willing to serve for the betterment of race, religion
and country. Youths imbued with high morals and strong resilience will
stand the challenges of our time and prevent them from being dragged
into the miseries of social ills. It is their generation that will continue with
our aspirations and strive to uphold the nation’s dignity. Parents must
give greater attention to their role in nurturing a responsible generation.
185. Unfortunately, there are some who undermine the status and
dignity of women. There are some husbands who divorce their wives
through SMS. Marriage is a noble event involving all family members,
especially parents of the bride and groom, kadi and witnesses as well as
close friends. Although Islam allows husbands to divorce their wives by
mere utterance of the words, divorce should not be taken lightly. It
should be carefully thought through as children often become victims.
Using SMS does not reflect respect for the sanctity of marriage and
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family institutions, including children. In addition, SMS is not secure as
anybody can use it to send divorce messages without the knowledge of
the husband. The resultant social problems will not reflect the true
character of Islam.
186. There are also some who restrict the contribution of women
in development by only allowing them to become teachers and welfare
officers and preventing them from becoming judges, Government
administrators or joining the security forces. For the Barisan Nasional
Government, women stand equal with men in the mainstream of
development. Female workforce has increased to more than 45%. In
the history of Islam, women had fought alongside Prophet Muhammad in
war, while in business, Saidatina Khadijah was involved in cross-border
trade. Remember, heaven lies beneath the mother’s feet. Behind every
successful man is a wife. The hand that rocks the cradle shakes the
world.
187. In the light of fewer male students in institutions of higher
learning, restricting the role of females will only result in reducing the
human resources of Muslims by more than half. As such, Muslims in
Malaysia will have to depend on others for everything. Do not be
disappointed when this happens. Do not blame the women if men are
unable to control their desires. Islam does not place the responsibility of
restraining desires solely on women.
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188. Programmes for the development of women and family
institution will be further enhanced and a sum of RM105.4 million has
been allocated. This includes training, guidance and counseling to instil
greater confidence and encouragement to women, especially single
mothers, the elderly and the disabled.
189. To enable single mothers in rural areas to increase their
income from their businesses, a sum of RM100 million from the Village
Micro-Credit Scheme will be set aside to provide loans to those with own
businesses. Single mothers in the low-income group will also be given
priority to purchase low and medium-cost houses from SPNB with a 20%
price discount.
190. The Government has provided several tax incentives to
employers to establish childcare centres at the workplace. However, the
response from private employers has not been encouraging. In this
regard, the Government may consider the establishment of such facility
as a condition in the development order of Local Authorities.
191. The Government is aware of the rising costs of bringing up
and educating children. To assist parents in reducing the burden of
expenditure on children, the Government proposes an increase in tax
relief from RM800 to RM1,000 per child.
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Youths as Future Generation Achieving Excellence in Sports
Mr. Speaker Sir,
192. The youths, who represent the future generation, that will
continue to strive to develop the nation, must be imbued with strong self-
resilience. Towards this end, the Government will implement the
National Service Programme involving some 100,000 youths. This
programme will include basic military training, civics education, character
building and social services, aimed at nurturing the spirit of cooperation,
national unity and integration as well as healthy lifestyle. An allocation of
RM300 million is provided for this programme.
193. The Government is proud of the success of our national
athletes who have brought fame and glory to the nation at the
international level. The most recent accomplishment is our national
marathon swimmer who has become the first from South-East Asia to
successfully swim across the English Channel. Physical resilience and
mental strength as well as endurance have enabled him to swim against
waves as high as 3 meters and to withstand the icy cold waters. Our
badminton players have also succeeded to become the All England
Champion as well as the first runner up in the World Badminton
Championship. Let these spur us to greater heights in sports. This
achievement is not merely another success of our national heroes, but
shows that with discipline, dedication and strong determination,
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Malaysians too can attain success in all fields. These achievements
should inspire and strengthen our determination to achieve excellence in
sports.
194. The Government values the contribution of all, including state
governments, corporate sector and NGOs in rewarding our sports
champions. I hope our athletes will not be distracted by these rewards,
but continue to improve their performance. In appreciation of our
athletes who have brought fame and glory to the nation and enabled
Malaysians to walk tall, the Government will provide scholarships for
those athletes who wish to further their studies locally or abroad to
become coaches or managers in the sports of their choice.
195. Our young men are the nation’s hope and our young women
the nation’s pillar. Healthy bodies make for active minds. A sum of
RM657.9 million is provided to the Ministry of Youth and Sports for 2004.
We are actively training our athletes for their participation in the 28th
Olympic Games in Athens, Greece. In addition, Malaysia will once again
host the Extreme Sports for the third year.
196. To provide greater recreational facilities to the public,
especially the youths, the Government will make the provision of such
facilities a prerequisite in new housing development projects. In addition,
all local authorities must provide facilities, such as parks and
playgrounds as well as recreational areas for activities, including jogging.
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For this purpose, the Government will provide an initial sum of RM50
million.
Providing Support to the Disabled
Mr. Speaker Sir,
197. The Government is concerned with the well-being of the
disabled and will ensure that they continue to benefit as well as
participate in the mainstream of development. Several financial
assistance have already been provided for them, including financial aid
of between RM80 to RM350 a month. As of mid-2003, a total of 122,543
disabled persons has registered and received financial aid, amounting to
RM88.5 million.
198. To encourage the disabled to continue working to support
themselves and their families, a Disabled Worker Allowance of RM200
per month has been provided if their monthly income ceiling does not
exceed RM500. The assistance is provided to meet the cost of transport
to the workplace as well as other expenses. To enable more disabled
workers to enjoy this financial aid, the Government proposes that their
income ceiling be raised from RM500 to RM750 a month.
199. As a measure to ensure that the disabled also have access
to job opportunities, the Government has allocated 1% of public service
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posts for the disabled. In addition, a special unit will be established at
the Ministry of Human Resources to assist the disabled in getting jobs.
200. The Government sympathises with the heavy responsibility of
parents with disabled children and the high cost of sending them to
special schools. To help these parents and their children, the
Government proposes that a monthly allowance of RM25 per person be
given to disabled students in primary and secondary schools to
encourage them to receive education. For the disabled in institutions of
higher learning, the Government proposes that the present monthly
allowance of RM300 per person for those with impaired hearing, also be
extended to them.
201. For civil service employees with disabled children, the
Government will allow them to work on flexi-hours to facilitate them in
caring for their children. The Government also proposes that the private
sector provides similar facility.
202. In the 2003 Budget, the Government had announced a fund
of RM100 million to finance treatment of those suffering from chronic
diseases. The Government now proposes that a special fund of RM10
million be established for the disabled suffering from chronic diseases.
203. Job opportunities for the visually impaired, such as typists,
stenographers and telephone operators are declining. As such, they
need to be provided with skills in new areas, such as IT, physiotherapy
77
and others. In this regard, the Association for the Blind is encouraged to
establish a network of Franchise Shops to provide opportunities for them
to become entrepreneurs as well as create more job opportunities. They
can also obtain financing from the Government’s Micro-Credit Scheme
and will be given suitable locations to establish a network of Franchise
Shops. In addition, the Government will also bear the full expenses for
the purchase of white canes and Braille machines for the visually
impaired.
204. The Government will also ensure that the disabled can own
comfortable and affordable homes. For this purpose, the disabled in the
low-income group will be given priority to purchase low and medium-cost
houses from SPNB, with a price discount of 20%.
205. To help reduce the cost of transport for the disabled, Syarikat
Prasarana Negara Berhad will give a 50% discount on travel fares.
Private transport companies are encouraged to extend the same facility.
In addition, the Government proposes that road tax be exempted on
locally manufactured cars, vans and motorcycles owned by the disabled.
206. To ensure the disabled also benefit from the use of ICT, a
Pioneer ICT Resource Centre will be established in Sungai Buloh to train
the visually and hearing impaired in ICT skills. The Government will also
provide ICT enabler to facilitate them to use ICT as a communications
tool, particularly at zebra crossings and during emergencies, especially
on the highways. In addition, all Government buildings will be provided
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with appropriate facilities to help the disabled in their dealings with
Government departments, including facilities in lifts. The Government
hopes the private sector will also provide such facilities for them.
Meeting the Need for Low and Medium-Cost Housing
Mr. Speaker Sir,
207. The Government is sensitive to the need for housing,
particularly for the low and medium-income group. Based on the
national population profile, especially those in the age group of 20 to 24
years, the demand for low and medium-cost houses is expected to
increase by 500,000 units in the next 5 years. To ensure this group will
have the opportunity to own houses, the Government will take over the
construction of low and medium-cost houses, particularly through
Syarikat Perumahan Negara Berhad (SPNB).
208. To reduce the burden of private housing developers, they will
be given the choice of either implementing the construction of 30% of
low-cost houses or allowing SPNB to undertake its construction.
However, they are required to pay a contribution in return. EPF
contributors who purchase low-cost houses built by SPNB will be
provided with end financing from MBSB. This will ease their financial
burden as well as reduce the administrative red tape in obtaining
financing from commercial banks. As the provision of low-cost housing
is a social responsibility of the Government, state governments are
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requested to exempt land premiums for the construction of low-cost
houses. All utility companies providing facilities, such as electricity,
water and telephone will also be requested to charge only basic costs.
209. A pilot project based on a new concept will be implemented
as a showcase on 1,000 acres of land owned by the Rubber Research
Institute of Malaysia (RRIM) in the Klang Valley for the construction of
10,000 units of affordable homes. The project will also be provided with
public transport facilities, religious centres, commercial facilities,
shopping centres, retail shops, recreation facilities, such as parks and
playgrounds and community halls as well as other facilities.
210. For 2004, the Government will provide a sum of RM558.8
million for several low-cost public housing projects. Of this, RM484
million is for the construction of 62,672 units of low-cost houses under
Programme Perumahan Rakyat and will be rented out to squatters in the
Federal Territory of Kuala Lumpur and major towns. The balance of
RM74.5 million is allocated as loans to state governments to continue the
construction of 28,541 low-cost houses.
211. For the armed forces, a sum of RM418.1 million is provided
to continue the construction of 2,500 units of houses, while RM251
million is provided to complete 44 housing projects for the police force. A
sum of RM38 million is provided for the construction of common use
quarters in the KLIA area and Kuala Lumpur.
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212. To solve the problem of abandoned housing projects, the
Government will undertake measures to expedite the rehabilitation of
such projects. Currently, there are 204 abandoned projects throughout
the country involving nearly 66,000 units valued at RM5.6 billion. The
rehabilitation of more than half of these projects involving 36,000 units
valued at RM3.4 billion is being undertaken by SPNB. To overcome the
delay resulting from problems between creditors, developers and banks,
Danaharta will manage the non-performing loans of the relevant financial
institutions and task SPNB to complete the projects. In addition, SPNB
will also take over and manage housing projects under Tabung Pusingan
Perumahan Kos Rendah (TPPKR), which is currently under TPPT Sdn
Bhd.
213. The Real Estate Investment Trust and the Property Trust
Fund will be established to enable small investors to invest in the real
property sector. The funds will be managed by professional managers to
generate more attractive returns. To encourage the development of
these funds, the Government proposes:
i. exempting the real property gains tax on gains from
disposal of property by individual or company to these
funds; and
ii. exempting stamp duty on instruments of transfer of real
property from individual or company to these funds.
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Clean Environment Makes Healthy Citizens
Mr. Speaker Sir,
214. A clean environment is paramount in preventing infectious
diseases, such as SARS which had recently affected the country. The
Government is serious in preventing contagious diseases that can be
fatal. As a measure to ensure cleanliness in our environment, an
appropriate waste disposal system, particularly in towns is essential. For
this purpose, the Government proposes to build a modern and safe
waste incinerator plant. The plant, which is expected to cost RM1.5
billion, is better than most waste incinerator plants even in developed
countries. In these countries, waste incinerator plants have been built in
industrial or housing areas without any opposition from residents.
215. To ensure the environment remains clean, an allocation of
RM1.9 billion is provided under several ministries and agencies. Of the
amount, a sum of RM680 million is provided for flood mitigation
programme, particularly in overcoming flash floods, which often occur in
Kuala Lumpur. In addition, a sum of RM462 million is provided for the
management of solid waste and RM422 million for sewerage projects.
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Non-governmental Organisations (NGOs)
Mr. Speaker Sir,
216. The Government acknowledges the contribution of NGOs in
carrying out welfare activities as well as appreciates their spirit of
volunteerism, even risking their own safety in undertaking their missions.
We have witnessed the courage and bravery of MERCY during their
peace missions to provide assistance to war victims in Afghanistan and
Iraq. In addition, several NGOs have supported and worked together
with the Government in dealing with social problems, such as drug
addiction, HIV/AIDS as well as caring for the less fortunate, such as the
elderly and destitute, disabled and those suffering from chronic diseases.
217. NGOs must strengthen understanding and cooperation
through smart partnership with the Government towards building a
responsible and caring Malaysian society. Towards this end, they must
set standards in evaluating their performance, especially with respect to
effective leadership as well as their activities and financial management.
This will enable them to become more ethical, efficient and accountable
in discharging their duties as NGOs.
218. The Government will continue to provide support and
contribution to NGOs to undertake their activities. A sum of RM96.4
million has been provided, including RM6 million for AIDS prevention,
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RM20 million for women and family development, RM20.8 million for
health programmes and RM26.6 million for the disabled.
Fostering Arts and Culture
219. Arts and culture depict the identity of a society. In this
regard, local works of art and culture must be nurtured to enable them to
thrive and flourish and to further cultivate the interests of art enthusiasts.
The lack of quality works of art and culture has resulted in promoters
bringing in performances from abroad. The Government has provided
several facilities, such as Istana Budaya, Philharmonic Hall in KLCC,
Kuala Lumpur City Hall Auditorium and several experimental theatres as
well as the National Arts Academy training centre. To achieve excellence
in arts as well as promote the teaching of arts, the Government has
allocated a sum of RM80.3 million, especially for the training of arts and
culture.
220. The Government has provided several tax incentives to
encourage arts and cultural activities, including exemptions on
entertainment duty on stage performances, income of music composers
as well as contributions by private sector for the sponsorship of arts and
culture. To encourage production of arts and cultural shows involving
local artistes, the Government proposes that deduction on contributions
by private sector be increased from RM200,000 to RM300,000. This
increase is specifically to sponsor performances by local artistes.
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221. To encourage the local production of quality films, producers
can access loans and venture capital from MTDC. With this, the
Government hopes that there will be better quality films produced locally
to substitute imported films to be screened in local cinemas and TV
channels.
Promoting Excellence in the Civil Service
Mr. Speaker Sir,
222. The public sector delivery system has often been raised in
budget dialogues. In this regard, the Government continues to improve
its delivery system to ensure the efficient and effective implementation of
national development policies and strategies. The process of approval as
well as the issuance of permits, licences and CFOs will be streamlined
and expedited. The Government will promote the use of ICT through the
implementation of e-Government. In the Ministry of Finance, services
such as e-perolehan, e-SPKB and e-stamping have been implemented.
In addition, the issuance of patents and copyrights will be expedited by
increasing the number of highly skilled personnel.
223. The Government appreciates the support and commitment of
the civil service for their efforts and services in ensuring efficient,
effective and successful implementation of development policies,
strategies and programmes. For the security forces, including the Police
and Armed Forces, the Government values their contribution and
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sacrifices in maintaining national security and public order. In
appreciation of their services in defending the country, the Government
will extend free medical treatment facilities to ex-Sarawak Ranger
personnel and wives as well as the wives of ex-personnel of Force 136
and the British Army. The Government will also extend to them the
benefits of hospital ward charges currently provided to families of ex-
reserve personnel of Malaysian Armed Forces.
224. The Government is also concerned with civil servants without
immediate beneficiaries, to benefit from pension upon death prior to
retirement. To ensure that the beneficiaries also enjoy similar benefits of
pensioners with immediate beneficiaries, the Government will extend the
derivative pension benefits, apart from gratuity to either one of their
parents.
225. The Government is confident civil servants will strive to
provide excellent services and are fully committed in their work and
responsibilities. In appreciation of the increase in their productivity and
services and after taking into consideration the improved economic
conditions, the Government has agreed to pay an additional half-month
bonus, making the bonus payment for the whole year to one-month
salary.
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Appreciating the True Teachings of Islam
Mr. Speaker Sir,
226. Presently, Islam has been associated with backwardness and
poverty. Since the 11 September incident, Islam has also been
associated with terrorism. In reality, Islam has high regards and respects
for its followers who are diligent, possess skills and capable of achieving
progress and prosperity in line with the principles of Islam. Indeed, Islam
emphasises on civilization or Islam hadari, which propagates excellence
as a way of life. Islam also promotes peace, stability and prosperity and
is against terrorism, aggression and brutality. The international
community should get to the root causes of terrorism and not accuse
Islam and labelling them as terrorists.
227. Islam as ad-din or a way of life encompasses all aspects of
life. If we stay with the basic teachings of Islam as in Al-Quran and
Hadith sahih, and not influenced by certain ulamas with their own
interpretations and teachings, which are against the true teachings of
Islam, there is no reason for the Islamic community to be weak,
demeaned and oppressed by others. Allah commands, as in surah Ar-
Ra’d verse 1: “Verily never, will God change the condition of a people
until they change it themselves.” To uplift oneself requires diligence,
knowledge and special skills. As such, we in Malaysia do not only pray
for help from the Almighty but also seek knowledge and skills as well as
implement our development plans and defence to ensure security for the
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nation. In this regard, many leaders and ulamas including Sheikh Al
Azhar have openly proclaimed Malaysia as an Islamic country that
should be emulated by other Islamic nations.
228. The perception that Islamic nations must be poor, backward,
with a government that is always asking for aid and weak, as in states
governed by those who are not competent in administration, indeed
humiliates Islam. These states cannot become the model of Islamic
nations capable of bringing back the past glory of Islamic civilization.
229. The Government will continue to emphasise measures to
instil the true teachings of Islam to ensure Muslims are imbued with
noble values and not be misguided by wrong teachings by those who
have worldly political interests. Towards this end, Jabatan Kemajuan
Islam Malaysia (JAKIM) will implement additional programmes to
enhance understanding and appreciation of the teachings of Islam. A
sum of RM228 million will be allocated for these programmes. The
Government also provides RM105 million to undertake the construction
of training complexes, religious schools, mosques as well as the
development of an Islamic information system.
230. As an Islamic nation, the Government is concerned with the
rising costs of performing the Haj. As such, the Government is
committed to ensure that such cost is contained. Otherwise, we are
concerned that in the future, many Malaysians in rural and urban areas
will be unable to perform the Haj.
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231. A major portion of the costs in performing the Haj is for air
travel and accommodation in Mekah and Madinah. As such, Syarikat
Penerbangan Malaysia Bhd (PMB) will acquire two aircrafts with the view
to reducing the high lease cost to Tabung Haji. In addition, Tabung Haji
will increase the construction and acquisition of accommodation in
Mekah and Madinah to contain the increase in the cost of
accommodation. The Government is pleased to announce that the cost
of performing the Haj through muasasah in 2004 will be reduced by 5%.
ECONOMIC PROSPECTS IN 2004
Mr. Speaker Sir,
232. The external environment is expected to further improve in
2004, particularly for several developed countries. This is attributed to
the expansionary fiscal policy, low interest rate regime, wealth effect
from the bouyant stock markets as well as lower petroleum prices. In
addition, consumer confidence remains strong while private investments
have also recovered.
233. The economic prospects for the region are also expected to
strengthen following the end of the spread of SARS as well as the
increase in private consumption and regional trade. China is expected to
continue to record high growth, with Korea, Taiwan and Hong Kong also
registering stronger growth in GDP.
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234. The Malaysian economic performance in 2004 is projected to
continue to expand strongly supported by robust domestic economic
activities as well as the recovery in external economies. In line with this
development and the positive impact of the Package of New Strategies,
GDP is forecast to further expand between 5.5%-6% in 2004. The
private sector is expected to spearhead economic growth with private
investment expanding strongly by 9.9%. Private consumption has also
responded positively to the stimulus measures and is projected to
expand at a higher rate of 7.7%.
235. The manufacturing sector will continue to be the main
contributor of growth and is expected to increase by 7.2%, while the
services sector by 5.5%. With the policy emphasis and strategies on the
agriculture sector as well as high commodity prices, the sector is
expected to expand steadily by 3%. The mining sector is also expected
to grow by 3.5%, following the increase in the production of LNG and
natural gas.
236. In line with fiscal consolidation policy, the Federal
Government financial position is expected to improve with the budget
deficit declining from 5.4% to 3.3% of the GDP. If global recovery is
stronger in the near term, the objective of attaining a balanced budget is
expected to be achieved in 2006. Higher world economic growth will
contribute towards strengthening the public sector account, which is
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expected to register a surplus of 0.4% of the GDP in 2004 compared with
a deficit of 1.5% in 2003.
237. Consistent with GDP growth, the per capita income is
expected to increase to RM14,954 while the purchasing power parity of
Malaysians will rise to almost US$10,000. Prices are expected to remain
low, with the Consumer Price Index forecast at 1.3%.
CONCLUSION
Mr. Speaker Sir,
238. Since Independence, the nation has gained considerable
success and achieved significant progress. In a span of almost half a
century, we have been able to sustain prosperity in an environment of
peace and harmony as well as unity among Malaysians. We have also
succeeded in maintaining political stability, on account of the strong
solidarity of the Barisan Nasional Government, which upholds the
principles of equitable collaboration, sincerity in our efforts as well as
willingness to sacrifice for the nation. This has been our tradition. This is
the uniqueness of our political collaboration that has strengthened and
fostered unity among all races under one nation.
239. However, we cannot be complacent of continued success.
The external environment continues to remain difficult, with increasing
threats and intimidations as well as aggression and oppression. The
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peace that we hope for is still far away, while the acts of terrorism that
we abhor, still have not subsided. As a small nation in the global
community, we are not spared the impact of the difficult external
environment.
240. We must be brave to face all these challenges. We must be
prepared to undertake strategic shifts in our drive to safeguard and
sustain the progress and prosperity that we have painstakingly worked
for. I had urged all Malaysians to make this paradigm shift when I tabled
the Budget 2003. We must undertake this shift with greater vigour,
determination and perseverance. We cannot be complacent, neither can
we waver in our efforts to effect changes. We must be courageous and
steadfast to face all obstacles and constraints. We must be willing to
sacrifice, set aside our self-interests and avoid discord and conflicts
among us. We must be more tolerant, reinforce our cooperation and
foster unity towards building a prosperous and harmonious Malaysian
society.
241. I pray to the Almighty that our beloved nation will continue to
be bestowed with prosperity and dignity. God willing, I am confident that
this nation will continue to progress, that Malaysians will be blessed with
continued prosperity and well-being as well as respected by the world
community.
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Because of you Malaysia
We uphold the nation, unite the people
We set a thousand steps forward
Together we strive in darkness, riding the waves
Seeking for the light, reaching for the dream
Defying a million obstacles
Though we may fall
We shall persevere to achieve our vision
Peaceful is my country
Blessed with success, bestowed with prosperity
United we stand, resolute in determination
Glow the spirit of patriotism
The world has acknowledged
Our dignity has been upheld
No more aggression
No more humiliation
Our independence enshrined
Peaceful is my country.… Malaysia
Mr. Speaker Sir, I beg to move.